RE-DATA MINING

"When Data Guys Triumph"

This is an article about how "Moneyball" has altered the career path of business students, how they’re now doing work in analytics, looking for inefficiencies.

The money quote is:

"In most industries, Generation Moneyball isn’t yet in charge. But as the Nobel laureate Max Planck once said, ‘A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die’ and a new generation grows up that is familiar with it.’"

In other words, Doug Morris is gonna die and those who inherit the music business will be beholden to none of the precepts handcuffing him. Having grown up with Napster and the free dissemination of music and ideas they’ll harness new tools to break new acts in new ways.

It’s not about changing the old guard, but waiting for when they move down the line.

The old guard is still fighting Napster. The old guard is complaining about meager Spotify payouts.

The new guard knows that getting noticed is your hardest job. How do you harness the Internet to spread the word on great music, knowing that once you’ve amassed an audience there are multiple ways to monetize, not all of them the same as in the old days.

Right now innovation is in tech, Silicon Valley is where the action is because there’s no old guard to prevent entry. You have an idea and you play.

But you’re frozen out of music. The major labels don’t want youngsters and it’s the same at Live Nation and AEG. Live Nation is not a growing concern, it’s an operation shrinking in search of profitability. But Irving Azoff is not going to live forever. Nor is Randy Phillips. And when they’re gone…

If you think the new breed of music executives will look like the old, you’re sorely mistaken. The new will be data-savvy, will have grown up with not only the Internet, but Spotify and Facebook and… Their perspective will be totally different.

But those in charge of the old game today can’t risk utilizing these new people. They believe they’re going to destroy their business model. Music must be expensive. It must be broken via radio. It’s best to get someone to go to one gig a year at an inflated price than many for bupkes.

Isn’t it interesting that so many of the new acts want tickets to be cheap.

They get it.

They’re going to inherit the business.

GROUPON

Coupon Sites Are a Great Deal, but Not Always to Merchants

Everyone knows the merchants get screwed, that they end up with twenty five cents on the dollar, that most customers are schnorrers who don’t become regular customers.

But what has not been mainstream knowledge until now is that these surfers generate ill will, that they partake and then complain:

"And the long-term reputation of the merchant may be at risk, according to a new study

Daily Deals: Prediction, Social Diffusion, and Reputational Ramifications

by researchers at Boston University and Harvard that analyzed thousands of Groupon and Living Social deals. The researchers found that fans of daily deals were on average hard to please. After they ate at the restaurant or visited the spa, they went on Yelp and grumbled about it. This pulled down the average Yelp rating by as much as half a point.

‘Offering a Groupon puts a merchant’s reputation at risk,’ said John Byers, a professor of computer science at Boston University who worked on the project. ‘The audience being reached may be more critical,’ he said, ‘than their typical audience or have a more tenuous fit with the merchant.’"

Whew, you think you want everybody, but you don’t. You only want your core, you want to grow slowly, you want lifers, not casual observers.

Look at it this way. If you blast yourself unannounced and unwanted into everybody’s face, you’d better be incredibly good, or you could be toast in a day.

Discounts hurt if what you have is of value.

Coupons give you the illusion you’re doing something, helping your career, when really you may be hurting it.

Sometimes you’ve just got to wait. Focus on your music instead of your marketing. Most people don’t like most things. And the best way to convince them they do is via quality and word of mouth. Better to have a friend take a newbie to the gig than the act cutting a discount so the newbie gets in. The newbie, according to this study, may talk trash, tell everybody he knows that he went to your gig and it wasn’t even worth half-price.

Furthermore, it now appears that Groupon is a fad, just like Guitar Hero.

The key with fads is to adopt early and get out early. The opposite of what the music industry tends to do.

Give Live Nation credit for getting in on Groupon.

But if they think it’s gonna pay dividends for them next year…

Furthermore, did it ultimately hurt them this year?

Sign up here:

jason hirschhorn’s Media ReDEFined

Every day I get an e-mail from Jason Hirschhorn entitled "Media ReDEFined". It’s a compendium of news stories that would be interesting to someone like Jason:

"Jason Hirschhorn is an entrepreneur most comfortable at the intersection between entertainment and technology. He was formerly CEO of his first venture, Mischief New Media, Chief Digital Officer of MTV Networks, President of Sling Media, most recently Co-President of MySpace and serves on the Board of Directors of MGM. Jason is also an investor in Svpply, ThisMoment, Howcast, Buzz Media, and other startups."

Huffington Post

And you’re probably more like Jason than a rock star. But today’s savvy stars track the kind of information Jason disseminates.

The stories are not music-centric or cable-centric, but they all revolve around the media sphere that enthralls us.

And there’s always a nugget or two that eluded my surfing, that fixates me. Like today’s link to a story on the Amazon Silk browser:

Amazon Gets Its Right With Video Explaining Its New Silk Browser

Skim the article, but watch the video.

The video has techies, Amazon employees who look like you and me, today’s rock stars as opposed to those stage-running, costume-changing money whores sold out to corporations hyped in all media known to man, explaining how Silk works.

Now I haven’t had my hands on the Kindle Fire. Seemingly no one other than Amazon employees has. I’ve got no idea how well it truly works. But I’m enthralled by this video. Because it’s not about flash, but substance. It’s logical, it explains something.

This is the future.

If you’re launching a new project, you’re better off with YouTube videos explaining the gestation than slick overpriced image-based ads posted everywhere known to man. Those who really care will seek them out. And will tell others, like I’m telling you now.

We want to know more. Play to those who do and they’ll spread the word.

Meanwhile, despite the above video, I think the best comment on the Kindle Fire was on last night’s SNL, which I bothered neither watching nor recording, knowing the best nuggets would make it to the Web, where I could cherry-pick them and not waste too much time:

Seth Meyers on Fire When It Comes to Amazon’s New Tablet

What Seth Myers says in the above video is this:

"It’s expected to sell well among parents who always buy the wrong thing."

That’s great comedy. Saying in very few words what those too close to a project cannot see. Kids want the best, it’s parents who sacrifice. Kids lead. Which is why so much advertising is targeted at them.

And finally, I’m not sure if Jason Hirschhorn covered this story in Media ReDEFined, but you should read it:

"Spotify Usage Explodes: The Social Network Effect"

To be very concise, Spotify saw monthly usage increase by more than 50% after announcing its new integration with Facebook.

This is fascinating to me because I’m O.D.’ed on the Facebook hype. At some point can you get off the merry-go-round, saying you’re sick from being bombarded with new services and endless information?

I guess not.

Turns out Facebook is powerful.

How long it lasts and how profitable it will ultimately be are different questions.

In other words, if you’re breaking something new, you go where the customers are. They’ll spread the word for you, if your product is good. And right now that’s Facebook. 

"The chief economic consequence of the creation of derivative securities was to price the risk more accurately, and distribute it more efficiently, than ever before in the long, risk-obsessed history of financial man. The chief social consequence was to hammer into the minds of a generation of extremely ambitious people a new connection between ‘inefficiency’ and ‘opportunity’ and to reinforce an older one, between ‘brains’ and ‘money.’"

"Moneyball"

Ergo Pandora…

We’ve entered a new world of winners and losers. You get to decide which side you want to be on. The old saw of starting at the bottom and working your way to the top is a fallacy, except for those gaining knowledge along the way, ultimately utilized in their own independent efforts, as opposed to those expecting to be rewarded and moved up the corporate food chain.

If you want to be a musician, hone your skill and follow your muse.

If you want to be a businessman, you’re going to have to be much smarter than the average bear, hard work will not be enough, not in industries like entertainment where it’s hard just to stay in, never mind win, you’re going to need an edge.

Future winners will not be those who went to music business college. The most those graduates can strive for is middle management. Those who succeed in the future will be rank outsiders, crashing the party, like Tim Westergren, with Pandora.

Westergren noticed an inefficiency in the market. Traditional radio excluded too much music and was peppered with too much you didn’t want to hear, not only music, but commercials and verbal drivel. What if you could deliver a music discovery platform that was closer to people’s desires, without all the detritus?

Pandora went public. Westergren is the one with the riches now.

Where are the inefficiencies? How can you amass data to quantify the status of the landscape and get insight into a path for the future?

That is your challenge.

Listen to no one who says otherwise. They’re just invested in the past, you’re invested in the future.

How can you eliminate as much chance as possible?

Westergren’s reliance on hired critics is not as good as Slacker’s reliance on deejays who program, but Pandora wins because of externalities. Being first in the marketplace, owning word of mouth. He who is the best doesn’t always win, success comes to he who gets the word out, who gains traction and maintains it.

And if you’re really good at it, you own the sphere. Until that sphere dies or you take your eyes off the ball.

We don’t need a better algorithmic search engine. We’ve got no problem with Google. Maybe a complete rethink might succeed, but it’s no wonder Bing is a money-loser. I don’t have a search problem, do you?

Then again, Google is being challenged in the mobile sphere and many now get their information from Facebook.

And having built so much infrastructure, Amazon is now killing its competitors not only with its buying power, but the vast trove of data it has regarding its customers. Amazon knows what people want. That makes it easier and more cost effective to deliver it to them.

If you want to be Jimmy Iovine, don’t do what he does, try to do better than what he does.

Create systems that allow you to spend less and make more for your acts while still delivering success. It’s very tough to beat Jimmy at his own game. But the field is wide open for a new game.

Read all the self-help books you want, but they’re a waste of time. They’re mostly about instilling confidence. Providing insurance that you’re on the right path.

If you don’t believe you can win, you’re not gonna.

If you need insurance you won’t take the risk.

But don’t take the risk without modeling. A hunch is not enough.

It looks like Steve Jobs creates products on a whim, but that’s not true. He’s aware of the cost of components, the delivery chain, the ability to partner with rights holders. You only venture into the unknown when you know as much as you can about what is able to be known. You do your best to make sure you succeed.

And your success is based on insight.

Steve Jobs saw that MP3 players were inefficient. Hard to use and hard to load music on. But he saw a burgeoning market for MP3s. Ergo, the iPod.

And telcos had built out high speed wireless, but every handset available, i.e. the BlackBerry, first and foremost, was terrible at surfing the Web. The BlackBerry is still terrible at surfing the Web, which is why it’s declining in popularity. Jobs saw all this and created the iPhone.

Even the iPad was a refinement of what came before. And ultimately a larger iPhone, not that big a stretch.

Not to denigrate Apple’s achievements, just to illustrate they were not build on thin air.

Sure, you’ve got to have an idea. But ideas are not as hidden as you think. They’re hiding in plain sight for he or she who can synthesize the existing data.

And then you need an edge.

The edge in "American Idol"?

19/Simon Cowell held the recording rights to the winner, and this was their area of expertise, so they could utilize TV to build recording stars.

It’s all about the edge.

Without it, you won’t win. Not for long.

We just don’t have enough data.

We pooh-pooh the entrance of amateurs into the game, everyone from Andy Lack to Guy Hands. But their approaches were wrong. Andy Lack was just an inexperienced hack. Guy Hands had knowledge of inefficiencies in costs, but he didn’t calculate the inefficiencies in creating a hit.

Let me put it to you this way. Let’s say a label has ten singles. Wouldn’t it behoove the company to know which one had the greatest chance of success, which one to invest money in?

But that’s not the way the business is run. It’s all about experience and advantage, relationships. As if an executive with decades of experience could pick hits because he’s assembled a great promotion team and has plenty of dollars in his account. But the hit to shit ratio of everyone from Clive Davis to Jimmy Iovine, never mind those further down the food chain, is just terrible. It’s because they’re running on gut instinct instead of data.

We just don’t have enough data.

We not only need to know where past records have placed on a chart, we need to know every person involved in them, who wrote the songs, how long they took to be recorded, why they were successful. If we had enough data and asked the right questions, we’d get some answers.

But no one on the inside wants it to be this way. They like the flashy entertainment lifestyle, the thought that they’re irreplaceable gurus.

But success not only comes with money and experience, it comes with the edge, exploiting inefficiencies in the market. If you can figure out why this track is a hit and another is not, you can make a ton of money.

Let’s start with a major label.

Who works there is very important. Not only who the head of promotion is, but his exact relationships, every record he’s ever been involved in, those he quarterbacked and those he took undeserved credit for.

And the artist. Were his hits out of the box or did they develop in secondary markets? Did they break from TV?

And of course Britney and Rihanna and Lady Gaga have track records, it pays to invest in them. But can you create a model that says whether their next record will be a hit? Instead of someone operating purely from the gut, can statistics help you make an informed decision?

Picking the right single is crucial in a project, can the process be helped?

I’m reading "Moneyball". And what is astounding is not only the ignorance of the established infrastructure, but the insight of those who made a difference. And the insight came from those who were smart and educated. These attributes are abhorred in the music industry. Music is where you go if you flunk out, if you can’t make it in the real world. Are the smarties going to wreck our business too?

They most certainly could.

All those Silicon Valley wizards? The financial titans? Those who weren’t rescued by the government, but profited in the downturn? They saw the connection between inefficiency and opportunity. They gained an edge. Based on data. Knowledge. Not gut feel.

When does Dr. Luke have a hit? How about Max Martin? If we ran all the data on every one of their productions, we’d learn things.

If the song is cowritten, does it improve or detract from the chances of it being successful in the marketplace?

How about how long it took to record?

Who played on it.

Which company it was aligned with…

Maybe it turns out that not every Dr. Luke record is successful, only those marketed by a specific company, helmed by a certain individual.

Is it worth it to sign the now contractually free act? Was it successful because of itself or the label? Was a cowriter or producer key to its success, and are they now on the team?

This is the future of the music business. This is where money will be made.

It might take decades to happen. But the smart people are going to enter music just like they entered baseball, for the love of the tunes, for the love of the game. And they’re going to exploit the inefficiencies to their advantage.

I’ll make it more clear. The number one inefficiency we have is the price of concert tickets relative to demand. That’s how we end up with the secondary market, that’s how we end up with dissatisfied customers.

If a band keeps costs low does their career have greater longevity? For every ten dollars you raise the price, does it take a year off their career?

Does the public really care if they pay an exorbitant amount if they have access to good tickets? That’s why so many acts scalp their own tickets, they’re afraid of looking greedy. Maybe this is a paper tiger, maybe the public just doesn’t care.

You can run the numbers and find out.

If you ask the right questions after establishing a mountain of data and analyzing it.

So, we might learn with a teen act that you overcharge and make the money now, because statistics tell us there will be no longevity. That’s what has me scratching my head with the Justin Bieber hype. Statistics tell us teen phenoms never last, why should this one be different, because Randy Phillips says so?

That’s like a baseball scout picking amateurs based on his gut.

Lady Gaga… How many people want to buy her merch. What’s the best way to get it to them… Is she best having a new record for Christmas, striking while the iron is hot, or waiting a year or two, fearful of overexposure.

And speaking of overexposure… Is it best to constantly engage your fans or go away? Same deal with giving away your music. If giving away music adds to your bottom line, do it. And vice versa if it doesn’t.

The educated are running circles around us in every facet of life.

The music business was trounced by college dropouts with computers. Napster killed the album. You can whine about it all day long, but it happened.

I’m not saying you employ this research to decide what type of music to record. You can do this, however soulless it might be.

But once you’ve got the music, then what do you do?

In radio, we’ve got call-out research and Arbitron, that’s it.

In record sales, we’ve got SoundScan, which revolutionized the business when it started twenty years ago.

We’ve got concert grosses, but how far did each patron travel to go to the show? Check the zip codes of the credit cards. That’ll give you an indication of fan loyalty.

You need passion for the game and mathematical skill. And ambition. And an ability to ask the right questions.

So far, we don’t have this.

But we will.

And those willing to change, to employ this data, are going to make a ton of money.

Just one more thing… Is "X Factor" failing because people hate Simon Cowell? Before Fox invested in his show, wouldn’t it have been worth it to ask this question? Research could have told you.

My gut is as much as Simon looked like the key to "American Idol", he was not. That’s why it could do so well after he left and why "X Factor" is a relative disappointment. In other words, the success of "American Idol" was not about Cowell.

Is the success of Lady Gaga about herself or her producer or Troy Carter or Jimmy Iovine?

You could run the numbers and find out. Really.